Near The Money

AAA

DEFINITION of 'Near The Money'

An options contract where the strike price is close to the current market price of the corresponding underlying security. An options contract is said to be near the money when the strike price and underlying security's price are close; it is at the money when the strike price is equal to the market price of the underlying security. At or near the money options contract typically cost more (i.e. there will be a higher premium) than out of the money options, where the underlying instrument's price is far away from the strike price. Also called close to the money.

INVESTOPEDIA EXPLAINS 'Near The Money'

An option with a current market value of $20 and a strike price of $19.80 would be considered near the money, as the difference between the strike price and the market value is only 20 cents. Generally, if that difference is less than 50 cents, the options contract is considered near the money.

RELATED TERMS
  1. Call

    1. The period of time between the opening and closing of some ...
  2. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  3. At The Money

    A situation where an option's strike price is identical to the ...
  4. In The Money

    1. For a call option, when the option's strike price is below ...
  5. Options Contract

    A contract that allows the holder to buy or sell an underlying ...
  6. Out Of The Money - OTM

    A call option with a strike price that is higher than the market ...
Related Articles
  1. Pin Down Stock Price With Real Options
    Investing Basics

    Pin Down Stock Price With Real Options

  2. Getting To Know The
    Options & Futures

    Getting To Know The "Greeks"

  3. The Importance Of Time Value In Options ...
    Options & Futures

    The Importance Of Time Value In Options ...

  4. The Controversy Over Option Expensing
    Options & Futures

    The Controversy Over Option Expensing

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center